Planned beverage tax may violate WTO rules – Angara

SENATOR Juan Edgardo “Sonny” Angara cautioned the government that the House of Representatives’ proposed two-tiered excise taxes on sugar-sweetened beverages may violate World Trade Organization (WTO) regulations.

The tax reform measure recently passed by the lower house includes a provision imposing a P10 excise tax on every liter of sugar-sweetened beverages containing locally-produced sugar while those containing imported sugar will be taxed P20 per liter.

“The WTO may find such two-tiered taxation discriminatory as the trade body generally bars its members from taxing imported products at higher rates to favor domestic products,” said Angara, chairman of the Senate Committee on Ways and Means.

The senator said that as a member country of WTO, the Philippines should ensure that its “tax regimes fully comply with international rules.”

The proposed measure is meant to discourage consumers from buying unhealthy drinks.

According to the Department of Health (DoH), consumption of sugar-sweetened beverages increases the risk of developing health problems such as blood sugar disorders, obesity, diabetes, and other related diseases like bone fractures, hyperacidity, tooth decay and heart problems.

“We are one in this effort to address the alarming rise in the number of diabetes and obesity cases in the country. But we must ensure that this will not cause undue burden to our ordinary citizens,” he said.

Angara noted that during last week’s Senate hearing on the proposed beverage tax, the departments of Finance, Trade and Industry, Foreign Affairs, as well as the National Economic Development Authority said they do not support the two-tier tax system “to avoid possible challenge at the WTO level.”

The WTO ruled in 2011 that the Philippines had violated its obligations under the General Agreement on Tariffs and Trade (GATT) by taxing foreign alcoholic beverages at rates 10 to 40 times higher than brands made locally from home-grown materials such as sugar and palm.

Angara said his committee will consider lowering the rates, limiting the coverage, and shifting to sugar-content taxation from a volume-based taxation.

The senator recently said he might push for a “more reasonable” excise tax on sugar-sweetened beverages by imposing excise tax depending on the sugar content of the beverage instead of taxing P10 every liter.

Under the House bill, sugar-sweetened beverages include sweetened juice drinks, tea and coffee; all carbonated beverages with added sugar; flavored water; energy drinks; sports drinks; powdered drinks not classified as milk, juice, tea and coffee; cereal and grain beverages; and other non-alcoholic beverages that contain sugar.

Angara said that with the current proposal, prices of some sugary drinks will increase by 50 percent, which he said “is much higher compared to other countries that imposed similar taxes.”

He said, “In Mexico, initial reports on its sweetened beverages tax, which began in 2014, showed that retail prices increased by about 12 percent while soda purchases declined by 10 percent.”